“Russian spy bank” in Hungary is close to collapse under sanctions

The International Investment Bank (IIB), which Russia governs, may look back on February as a turning moment in its more than 50-year history. An increasing number of analysts believe that this month marks the beginning of the end for this peculiar and mysterious financial organization.

Shareholders don’t like aggressors

The IIB has suffered due to Russian war in Ukraine due to the financial sanctions placed on Russia and the departure of several shareholders from Central and Southeast Europe since the invasion. This has further weakened the Hungarian government’s attempt to strike a balance between courting Russia and maintaining membership in the EU and NATO, as seen, for instance, by the controversial decision to permit the IIB to locate its new headquarters in Budapest.

On February 17, the development bank issued a brief statement regarding a “criminal hacker attack” that had led to “an unlawful mass phony email dissemination on behalf of certain IIB personnel.” This is when the terrible news first surfaced.

Hack showing grim situation

According to internal IIB documents obtained through the anonymous hack, a senior IIB official warned the bank’s management in a letter in mid-December that the bank would soon face insolvency, according to the independent Hungarian news portal Hvg.hu on February 27. After the Russian invasion, Euroclear, a financial services corporation with headquarters in Belgium specializing in settling local and international securities transactions, had frozen the IIB’s assets. “Such a significant deficit for the first quarter of this year that even the sale of the loan portfolio would not be enough to make up for it,” the CEO projected in the letter.

It appears from the released records that the bank had already started looking for assistance. According to a different letter, whose reliability hvg.hu could not vouch for, the Belgian finance minister was persuaded to unfreeze the assets last autumn by Marton Nagy, the Hungarian minister of economic development and Hungary’s representative on the IIB board. The Belgian Finance Ministry rejected the request, claiming that the board members were suspected of having ties to the Russian government and were therefore covered by European sanctions. This quickly crushed the bank’s aspirations, according to a letter from hvg.hu.

Banking secrecy

Even though the IIB maintains that the leaked documents are “false,” the bank’s well-documented struggles since Russia’s infiltration are undeniable.

The bank is a peculiar being that is frequently referred to in the world media as the “Russian spy bank” due to its connections to spies in the past and present (the chairman Nikolay Kosov is the son of one of the most well-known spies in the Soviet Union, Yelena Kosova).

It was initially established in 1970 as a bank for the Soviet Comecon to promote trade and development. After 1990, it went dormant for 20 years, but Putin brought it back in the 2010s, allegedly after Cyprus stopped being a haven for wealthy Russians and oligarchs looking to hide money abroad.

The IIB’s issues started almost immediately after Russia invaded Ukraine in February 2022. The credit rating companies Fitch and Moody’s downgraded it to junk in addition to the EU freezing its assets. Then, four shareholders—Czechia, Slovakia, Romania, and most recently, Bulgaria—announced they were leaving the bank, leaving only Hungary as the lone EU member to remain.

Hungary is currently the IIB’s second-largest stakeholder with 25,2%, trailing only Russia with 45,4%. Around 5% of the shares are under the ownership of Cuba, Mongolia, and Vietnam. Later this year, when Romania and Bulgaria exit, Russia runs the prospect of acquiring the majority stake, making the company a Russian bank and subject to EU penalties.

Serbian attitude

For some, Serbia would be the obvious choice. The Serbian government agreed to become a shareholder in the IIB in 2021, but there is no proof that it has acquired any shares. The IIB’s European expansion, according to Imre Laszlocky, deputy head of the management board, would logically lead to Serbia joining. He made this statement to the business publication Figyelo towards the end of 2021.

Hungary might theoretically expand its stake, but the country’s Finance Ministry is avoiding the topic, at least in public. The first is that Hungary’s budget finances are in a bad situation, and the second is that officials know that investing any money in the IIB is not a sure thing. Many believe that the government is trying to distance itself from the bank’s fate with its pessimistic remarks from the chief of staff to Orban, Gergely Gulyas. However, there will still be questions regarding the 74 billion forints (200 million euros) in public funds that the government has already invested in the bank.


The so-called IIB bill, which the Hungarian parliament reportedly approved but believed to have been drafted in Moscow, opposes any control of the bank by the country. The IIB is not subject to any financial or regulatory oversight or management and is not required to follow accounting standards. Likewise, the IIB’s assets and property are protected from legal action. The statute further specifies that the premises are impregnable and that Hungarian officials may conduct no official business within the structure.

The IIB appears to be the Hungarians’ only option until the Russians decide to depart, even though the bank cannot engage in significant financial activities.

Photo: Hungarian Minister of Foreign Affairs and Trade Peter Szijjarto (R) and Nikolay Kosov, Chairman of the Board of International Investment Bank (IIB), are seen during their meeting in Ibis Styles Budapest Airport Hotel in Budapest, Hungary, 20 March 2018. EPA-EFE/Tamas Kovacs

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